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Despite a policyholder’s statutory right to stack separate uninsured motorist policies, a household vehicle exclusion clause precludes that right, the Superior Court ruled on Monday. The court said it was bound by case law to deliver such a conclusion in State Farm v. Craley, but two of the three judges deciding the case urged an alternate interpretation of the validity of interpolicy and intrapolicy stacking waivers under Section 1738 of the Motor Vehicle Financial Responsibility Law. Judge Richard B. Klein, joined by Senior Judge Peter Paul Olszewski, said the Superior Court decisions describing the interplay of stacking waivers, household vehicle exclusions, and what can and cannot be waived under Section 1738 are “far from models of logic and clarity.” Klein questioned the rationale of the Superior Court’s holdings in State Farm Mutual Insurance Co. v. Rizzo and In re Insurance Stacking Litigation, saying that the current interpretation of Section 1738 gives too much weight to one part of the law over another. Judge John T. Bender wrote separately in a concurring and dissenting opinion to say he agreed with the result of the panel’s holding but that Klein’s further analysis was “unnecessary.” “Stacking” refers to the accumulation of insurance coverages available from different vehicles or policies in order to amass a greater pool of benefits for the policyholder. Under interpolicy stacking, a claimant could recover uninsured or underinsured motorist benefits from more than one policy. Under intrapolicy stacking, a claimant could use the coverage available on other vehicles insured under the claimant’s policy after the claimant has exhausted the coverage on the vehicle under which the claimant was insured. In waiving the right to stack, claimants choose a decreased premium by forgoing the right to come back to their policy if they elect to claim coverage from another source that presumably has a higher cap. In 1993, Jayneann Craley was killed in a car accident caused by an uninsured driver, and two of her relatives who had been living with her were injured, according to the opinion. Craley’s household included her husband, Randall P. Craley. Both husband and wife were insured separately under State Farm policies, and both policies had a waiver of stacking clause and a household vehicle exclusion clause, according to the opinion. A Berks County judge had ruled in a declaratory action that neither the household exclusion clause nor the waiver of stacking clauses applied in Craley because they violated public policy. Therefore, the Craleys’ policies could be stacked. Klein said the court was correct to conclude that the Craleys’ separate policies resulted in interpolicy stacking that rendered the stacking waiver invalid. A stacking waiver is not valid when two cars are insured under separate policies, the Superior Court ruled in Rizzo. Daniel E.P. Bausher of Stevens & Lee in Reading had argued this position in representing the Craleys. “The law sets forth that this coverage is available,” Bausher said. “You should be able to get to the coverage of another vehicle under which you’re insured.” However, while it appeared the Craleys’ policies could be stacked, the Superior Court ruled last May in Nationwide Mutual Insurance Co. v. Harris that household vehicle exclusion clauses are enforceable, making unavailable coverage for any car owned by a resident relative other than the one involved in the accident, Klein explained. Therefore, the Craleys’ policies cannot be stacked, and State Farm is only liable under Jayneann’s policy — not Randall’s, Klein concluded. In Rizzo, decided last September, the court ruled that the law only intended policyholders who have more than one vehicle insured under a policy to be able to waive stacking. State Farm, represented by Teresa Ficken Sachs of Britt Hankins Schaible & Moughan, had argued in Craley that the Superior Court wrongly decided Rizzo, which adopted what Klein noted “might be dictum” from In re Insurance Stacking Litigation. (State Farm is waiting to hear if the Pennsylvania Supreme Court will review Rizzo on appeal, Sachs said.) State Farm contended that the court shouldn’t distinguish between waivers in interpolicy and intrapolicy scenarios because such a distinction is not mentioned in the statute, according to the opinion. “While this might be confusing and there might be little reason to make such a distinction, we are bound by Rizzo,” Klein wrote. “ We likewise sympathize with the position of Judge Kate Ford Elliott who, speaking for the majority, said in Harris, supra, she was ‘hard-pressed to understand’ how there can be a statutory right to allow stacking which cannot be waived in interpolicy situations but allow it to be taken away by a household vehicle exclusion.” Whether “this presents the most logical scheme,” Klein continued, “that is what the case law requires and we are bound by the cases until an en banc panel of this court, the Legislature or the Supreme Court decides otherwise.” Bausher said he thought that Klein did sympathize with the Craleys’ position in some ways, but “his hands were tied.” Although the court disposed of the case by pointing to the household vehicle exclusion clause, Sachs said Klein added his analysis of the stacking issue because it needs further clarification in light of Rizzo. “Now that the Superior Court in Craley has recognized that there’s a reason to question the rationale in Rizzo, it may provide some additional impetus for the Supreme Court to grant review in Rizzo,” Sachs said. Klein did suggest an alternate interpretation of Section 1738 in which part (a) presumes stacking for both intrapolicy and interpolicy situations, part (b) states that both intrapolicy and interpolicy situations may be waived, and part (c) says insurers must only inform the policyholder of the means and manner of waiving intrapolicy stacking. (Copies of the six-page opinion in State Farm v. Craley , PICS No. 04-0161, are available from The Legal Intelligencer . Please refer to the order form on Page 7.)

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